This article was originally written, on request, for Risk Group LLC, for their December 2005 edition on health care risks. It has been reposted here, reformatted for this web site, and as with most articles on this site, has and will be updated more as time allows.
This article looks at some global aspects of health issues, such as the impact of poverty and inequality, the nature of patent rules at the WTO, pharmaceutical company interests, as well as some global health initiatives and the changing nature of the global health problems being faced.
Although the statistics above make for grim reading, an important underlying cause of all these deaths is poverty. The World Health Organization (WHO) and others repeatedly point out that many of these diseases are diseases of poverty.
However, some diseases are now not only the result of poverty, but have been contributing to poverty—a nasty feedback loop. In the case of malaria, for instance, the WHO notes that,
Structural Adjustment—Cutting back on vital health and education services
Economic policies, such as Structural Adjustment Programs (SAPs), enforced by the IMF and World Bank for decades on poor countries have had a disastrous effect on health. SAPs were designed as an economic measure to promote fiscal austerity for poor countries that were burdened with heavy debt repayments to the rich countries. With the economic and third world debt crisis in the 1970s and 1980s, developing countries were pressured to take on Structural Adjustment. Economies were restructured to ensure debt repayment to the rich countries, but this meant reducing the standards of living for most people. Side NoteThat much of third world debt has been considered odious debt, is another issue in its own right!
The typical prescription to this economic medicine included:
Privatization at all costs;
Capital market liberalization;
Market-based pricing; and
Regardless of specific circumstances, almost all developing countries were handed the same medicine.
As former World Bank Chief Economist and Nobel Prize winner for economics, Joseph Stiglitz noted, the IMF typically handed out these policies with a blind allegiance to market fundamentalism. This had a number of effects:
Poor countries, typically without fully developed market economies, were driven into further poverty as state protection and nurturing of domestic industries were abandoned, leaving the country open to foreign takeover of key services and sectors;
Cost of food, health services, education and other critical functions went up as important subsidies and other such programs were removed;
Social unrest, or as Stiglitz called it, IMF riots occurred as the cost of living became unbearable
Barriers to trade were removed, but in its place were the WTO rules, which favor the rich countries.
In terms of health, services were reduced or removed, and now health care is either unavailable for the poor in many parts of the world, or is too expensive. As noted above, 1 billion lack access to health care.
In Africa, for example,
Despite these problems, the recommended solution by the IMF and others was privatization of the health system. For Africa, however, and many other poor countries, this was not appropriate.
Furthermore, poverty has contributed to the phenomena of brain drain whereby the poor countries educate some of their population to key jobs such as in medical areas and other professions only to find that some rich countries try to attract them away. The prestigious journal, British Medical Journal (BMJ) sums this up in the title of an article: Developed world is robbing African countries of health staff. (Rebecca Coombes, BMJ, Volume 230, p.923, April 23, 2005.)
Large Pharmaceutical Companies—Profit at all costs?
For many years, the large pharmaceutical companies and their lobby groups have come under sharp criticism for intensely lobbying rich country governments to protect their interests around the world through things like enforcement of strict patents laws on medicines, allowing companies to monopolize their products, charging high prices for medicines that people around the world depend on.
For the large companies, they feel their investment into research and development would suffer if other companies then simply copy what they produce. Yet, a lot of the base science and research that the large companies have benefited from has been publicly funded—through university programs, government subsidized research, and other health programs. Privatizing such profits may be acceptable to a certain degree. Certainly, the large pharmaceutical companies have created medicines that have saved millions of people’s lives. However, Jamie Love, an AIDS activist,
Some of the plants patented for their medicinal purposes do not even belong to the rich countries where most of the big pharmaceutical companies are based; they come from the developing world, where they have been used for centuries, but patented without their knowledge. Economist and director of the Third World Network, Martin Khor writes,
From a purely economic perspective, the idea of patents is to spur innovation, but with pharmaceuticals, it is not just about economics. Dr. Drummond Rennie, from the Journal of the American Medical Association, noted in a television documentary that
However, critics are pointing out that as well as saving lives, they are also taking lives from the poor, especially in the developing world, where, through rich country governments, they have lobbied for policies that will help ensure that their patents are recognized in most countries, thus extending those monopolies on their drugs. Writer and broadcaster, John Madeley, summarizes a number of concerns raised over the years:
The big pharmaceutical companies have caused enormous uproar in recent years when they have attempted to block poorer countries’ attempts to deal with various health crises. A vivid case is that of South Africa and cheaper generic drugs. The huge pharmaceutical association, PhRMA (Pharmaceutical Research and Manufacturers of America), and other large companies had intensely lobbied the then US Vice President, Al Gore, in 1999, to threaten South Africa with trade sanctions for trying to develop cheaper, generic drugs to combat AIDS. They claimed that World Trade Organization (WTO) rules regarding patents and intellectual property were being violated.
In fact, there was no violation. As problematic as the WTO rules have been in this area, there was provision in the rules allowing generic drugs to be created for emergency situations and public, non-commercial use. While public outrage managed to get such a move backed down, the underlying concerns from the big pharmaceutical companies have remained, and in various ways since, they have pressured the United States and other rich, industrialized nations to prevent other countries from doing similar things.
You can understand why the big companies are in fear. When CIPLA, one of India’s leading generics companies, offered a cocktail of anti-retroviral drugs for AIDS at $350 a year, compared to $10,000 from the multinational companies, this sent a shockwave in two ways. Poor countries realized they might have more affordable means to deal with a massive health crisis that afflicts them the most; and the large multinationals saw their monopoly prices severely threatened, and, exposed.
Brazil too has found itself under pressure from the United States for producing cheaper generics. When its currency devalued in 1999, the case of Brazil also highlighted another issue: the high cost of imported drugs from the big pharmaceutical companies become even more costly as exchange rates fluctuate. Even though the dollar may be relatively weak currently, other rich countries where pharmaceuticals may be purchased from have currently got currencies that are stronger than the dollar. Currencies of course fluctuate. The point is then, that the fluctuation makes it harder for poorer countries to forecast how much the drugs may cost. They, and any other country would be dependent upon price negotiations with the pharmaceutical companies, too.
On April 27, 2003, Britain’s Channel 4 aired a documentary titled Dying for Drugs. Noting that drugs bring billions to big pharmaceutical companies, and hopes to people, they asked, how far would drugs companies go to get their drugs approved and the prices they want? As the documentary said in their introduction, the implications are alarming and if their power remains unchecked, many more people will soon will be dying for drugs.
In Africa, the documentary showed how one of the world’s biggest drug companies experimented on children without their parents’ knowledge or consent. In Canada, it was revealed how a drug company attempted to silence a leading academic who had doubts about their drug. In South Korea, it followed the attempts of desperately ill patients to make a leading drug company sell them the drugs they need to save their lives at an affordable price. And, in Honduras they showed the brutal consequences of drug companies’ pricing policies whereby to save a 12-year old child dying from AIDS, people had to smuggle drugs from across the border, in Guatemala, breaking the law in the process, just to get the drugs at affordable prices. The child died while the documentary crew filmed the desperate smuggling.
Experts interviewed in the documentary also made some important points of note:
On the controversial high pricing for drugs, the documentary noted, Big pharma generally defends high prices for new drugs … to cover costs for researching and developing new drugs. But in fact, most new drugs launched are just slight variations of existing medicines. So called Me Toos. Nathan Ford, of Médicins Sans Frontiéres said, At the moment we are getting more and more drugs of less and less use. Me Too drugs; the tenth headache pills; the 15th Viagra. There are currently eight drugs in development at the moment for erectile dysfunction. Do we need 8 more drugs for erectile dysfunction? I don’t think we do. Meanwhile diseases like Malaria, TB that kill 6 million people every a year, are neglected—no new medicines are coming out and we are left treating people with old drugs that increasingly don’t work.
Markets for pharmaceutical companies are not just about finding people to target, but people with money. Dr. Jonathan Quick of the World Health Organization (WHO) added that the majority of the market for some of the tropical diseases is in developing countries but, it’s a market in terms of numbers of people but the purchasing power is not there [and therefore] the normal dynamics of the research and development industry just don’t address those problems.
In another example of how power was used, the documentary noted what happened in Thailand in 1990: the Thai government was making a number of generic drugs. They also wanted to make a generic AIDS drug. However, the U.S. Trade Representative threatened them with export tariffs on wood and jewelry exports, which made up some 30% of Thailand’s total exports. The Thai trade representative was very frightened and they stopped making the generic drugs. The U.S Secretary of Commerce threatened the South Korean Minister of Health in a similar way, but despite those threats, he continued campaigning for cheaper drug prices. He was later sacked. How do companies have such power over entire countries? Jamie Love, also interviewed in this documentary, suggested an answer:
These, and other examples presented in the documentary were not isolated cases. Hard-fought changes to WTO rules that would have allowed poorer nations easier access to generic drugs was agreed to by virtually every member country in the world, but was resisted by the U.S.—their veto killed the agreement. Side NoteFor more information on this aspect, see the Dying for Drugs link above. See also: Pharmaceutical Corporations and Medical Research from this web site; Larry Elliott and Charlotte Denny, US wrecks cheap drugs deal, The Guardian, December 21, 2002
WTO—Patents, Intellectual Property, Emergency Drugs and Developing Countries
Due to what many believe is reasons of bad publicity, many large pharmaceutical companies have given away AIDS and other drugs at cheaper prices and even donated large sums of money to global initiatives. However, less discussed are the many fundamental issues that affect poor countries: access to essential drugs, allowing cheaper alternatives to be more easily made available, patent issues, the rights for poorer countries to pursue these alternatives, and so on.
Many of these issues go to the heart of the World Trade Organization (WTO) and the global rules made at this organization to accommodate world trade. However, critics for many years have said that the WTO is overly influenced by the rich countries, who are far more able to wield their economic and political influences to get what is best for them, often at the expense of the developing world. Side NoteSee a collection of articles from this web site’s free trade-related issues section for more information.
TRIPS (Trade-Related Aspects of Intellectual Property) is one of the main areas of the WTO agreements. Created in 1994, medicines were included in its patent rules. Some of its rules had come under severe criticism from activists and developing countries. Concerns included that TRIPS allowed monopolization of life-saving drugs for 20 years, risking price increases, and even stifling innovation. Poor countries cannot afford to wait 20 years to enjoy the benefits of important drugs.
Developing countries had to enforce the TRIPS rules by 2005, but the Least Developed Countries (LDCs)—32 of them in the WTO—had until 2006. (In the 2005 WTO meetings in Hong Kong, LDCs requested a 15-year extension for administrative, economic, and financial reasons. This was reduced to a 7½–year extension with conditions attached (for example, any changes in the meanwhile must not be less consistent with the provisions of the TRIPS agreement.)
During the WTO meeting in Doha, Qatar, 2001, the overall outcome was not seen as favorable for the poor. However, one area where there was some success was in health issues. Slightly strengthened WTO TRIPS rules meant governments that could not afford branded drugs would be able to take measures to protect health a bit more easily by creating cheaper generics themselves, through compulsory licensing.
WTO patent rules still allow 20 years of exclusive rights to make the drugs. Hence, the price is set by the company, leaving governments and patients little room to negotiate—unless a government threatens to overturn the patent with a compulsory license. Such a mechanism authorizes a producer other than the patent holder to produce the product though the patent-holder does get some royalty to recognize their contribution.
Parallel importing is another potentially powerful mechanism available to poor countries. Effectively, it allows a nation to shop around for the best price for the same drug, which may be sold in many countries at different prices.
Compulsory licensing and parallel importing (in particular, parallel importing of generic drugs) are very effective tools to get prices down for developing countries. For example, the above-mentioned documentary noted that a drug in question had been offered in Brazil at dramatically reduced cost by Novartis themselves because of the threat that generic versions would have posed. (In the Europe Union (EU), parallel importing has been practiced for a while, though it is only on brand drugs and only amongst EU member states, so the benefits to patients of reduced prices appear more questionable. Side NoteFor more information on this, see for example: EU pharmaceutical parallel trade—benefits to patients? from the London School of Economics, January 27, 2004; European Union should liberalize drug market, EU judge says, from Bloomberg, April 18, 2005.)
However, compulsory licensing laws in TRIPS imply that generics are only to be used for domestic purposes, not for export, and so parallel importing—which has been strongly resisted by the US and the pharmaceutical multinationals—was not part of the 2001 agreement. In reality, this means that given most poor countries do not have a sophisticated domestic pharmaceutical industry and thus would not have the ability to make their own generics, they would likely have to purchase the more expensive branded drugs.
At the next major WTO meeting, in Cancun, Mexico in September 2003, the developing countries managed to get another small win. But parallel importing may still prove difficult:
In addition, as noted further above however, the US has sought to undermine the agreement made at Doha. Oxfam, a prominent NGO, has been highly critical of the practices of big pharmaceutical companies, arguing that, The U.S. Trade Representative is pursuing standards of patent protection which go far beyond WTO patent rules, and it is doing so regardless of the devastating impact that this could have on … developing countries. Oxfam also believes the US is pursuing this pro-patent agenda on behalf of its powerful pharmaceutical lobby, PhRMA. The industry has an interest in strong patent protections, which limit generic competition and therefore protect its market share and profits. Furthermore,
Martin Khor reported for the Third World Network on a global AIDS conference in Bangkok, July, 2004 and also commented on the negative impacts of the growing number of bilateral agreements signed with the US that Oxfam alluded to. These agreements, Khor wrote, are creating new barriers to access to medicines, as they forbid the developing countries from policies (which the WTO allows) that promote generic medicines. To add to the sour French-US political relations, There was a diplomatic uproar when the French President Jacques Chirac accused the US of blackmailing developing countries to give up measures to obtain life-saving drugs through these bilateral trade deals.
Since around 2000, a number of global initiatives have been set up to deal with various global health crises. To their credit, the big pharmaceutical companies have been actively involved in them, too.
Mega-rich individuals, such as Bill Gates, have also shown incredible charity by donating hundreds of millions of dollars to these initiatives. Some of the donations from people like Bill Gates are not without their criticisms for other motives, however. Side NoteSee for example, Gates gives $100m to fight HIV, $421m to fight Linux, by Thomas C. Greene, The Register (UK), November 11, 2002; Bill Gates: Killing Africans for Profit and PR, by Greg Palast July 14, 2003. But more fundamentally, as the magazine Himal South Asia notes,
The Global Fund to Fight AIDS, TB and Malaria was created at the urging of UN Secretary General, Kofi Annan, in 2001. It was supposed to be the largest fund set up to tackle these global health issues. However, it has suffered from poor funding, slow distribution, and other political obstacles from some of the richest countries such as the US that would prefer to have their own initiatives so they have more control over where the money goes (the Global Fund is supposed to be a fund where countries donate without any strings attached. The US, as the international HIV and AIDS charity AVERT criticizes, prefers to go via its own PEPFAR (the President’s Emergency Plan For AIDS Relief). This allows the US to avoid supporting countries perceived to be hostile, or those who may support programs it currently does not like—such as abortion and condom use, or use of generic drugs. For a good overview about the challenges and obstacles for the Global Fund, see The Global Fund to Fight AIDS, Tuberculosis and Malaria by AVERT, September, 2005).
As Oxfam and other organizations have charged, the large pharmaceutical companies are using corporate philanthropy to push their products at prices that would still be higher than generics, which poorer countries would be able to afford:
Poverty exacerbates health issues. Under conditions of poverty, entities such as large pharmaceutical companies can wield even more power and influence over poorer countries. Some major reasons for unnecessary deaths around the world are therefore due to human decisions and politics, not just natural outcomes. Well-intentioned companies, organizations and global action show that humanity and compassion still exists, but tackling systemic problems is paramount for effective, universal health care that all are entitled to.
Addressing health problems goes beyond just medical treatments and policies; it goes to the heart of social, economic and political policies that not only provide for healthier lives, but a more productive and meaningful one that can benefit other areas of society.